wharton mba workshop
TRANSCRIPT
ProfessorBernice Grant
WHARTON MBA WORKSHOP:
EMPLOYMENT AGREEMENTS:LEGAL CONSIDERATIONS
October 1, 2018
Please note that this workshop is for educational and informational purposes only. It does not constitute the provision
of legal advice or the creation of an attorney-client relationship between
attendees and the presenter, Fordham University School of Law, or Lincoln
Square Legal Services, Inc.
DISCLAIMER
¡ Slido.com¡ Code: Wharton
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¡ Introduce Case Study ¡ Overview of Employment Agreements¡ Restrictive Covenants§ Social Media§ Non-Disparagement§ Moonlighting§ Confidentiality and IP§ Non-Solicitation§ Non-Competition
¡ Q&A
AGENDA
Wharton MBA Student with job offer
INTRODUCE CASE STUDY
JOB OFFER
JOB OFFER LETTER OR EMPLOYMENT
AGREEMENTCOMPENSATION
PACKAGE
POSITION, DUTIES, AND LOCATION
RESTRICTIVE COVENANTS
¡ Position, Job Duties, Work Location ¡ Compensation Package: § Base Salary§ Employee Benefits§ Bonus?§ Equity Compensation?§ Severance?
¡ Restrictive Covenants
OVERVIEW
RESTRICTIVE COVENANTS
¡ Social Media¡ Non-Disparagement¡ Moonlighting¡ Confidentiality and IP¡ Non-Solicitation¡ Non-Competition
RESTRICTIVE COVENANTS
¡ Does your employer have a social media policy?
¡ Might prohibit:§ Defamation§ Offensive language (e.g., racist, sexist, etc.)§ Harassment§ Confidential information
¡ Might require disclaimer¡ Must comply with NLRA
SOCIAL MEDIA
¡ Disclosing confidential info can violate securities laws
¡ Recent Example: Elon Musk, CEO of Tesla§ SEC imposed $40M fine and required Elon Musk to step
down as Chairman because his tweets misled investors§ Tesla will enhance its social media policy for executives
and corporate governance
SOCIAL MEDIA –SECURITIES LAW CONCERNS
¡ Might apply during and/or after employment¡ Sometimes negotiated as part of severance
package¡ Must comply with NLRA
NON-DISPARAGEMENT
¡ Increase due to “gig” economy¡ Employer might prohibit or limit moonlighting¡ Typical provisions:
§ Advance written notice/approval § No interference with work schedule§ No conflicts of interest, confidential information
disclosure, or competition§ No use of company property, equipment, email, etc.§ Restricted to volunteer roles
¡ State/local law and IP considerations
MOONLIGHTING
¡ Confidentiality and Invention Assignment Agreements
¡ Review to assess:§ Definition of work product (how broad?)§ Activity restrictions (how restrictive?)§ Duration (is there a holdover clause re: IP?)§ Reps & warranties (any conflicting obligations?)
¡ Consider state law limitations (CA, DE, IL, KS, MN, NC, UT, and WA)
CONFIDENTIALITY AND IP
¡ Some companies want IP rights to inventions created post-termination as well
¡ Courts vary, but generally use balancing test¡ More enforceable if duration and scope are limited:
§ Conceived or substantially begun during employment/engagement
§ Created as a result of work performed during employment/engagement
§ Relates to company’s confidential information or trade secrets
TRAILER/HOLDOVER CLAUSES
¡ Non-solicitation of employees (no poaching)¡ Non-solicitation of clients/customers¡ Consider duration and scope of provision
NON-SOLICITATION
NON-COMPETES
Confidentiality, Noncompetition and Invention Assignment Agreement
As a condition of your employment, you must sign the enclosed Confidentiality, Noncompetition and Invention Assignment Agreement (the "Agreement"). The Company's willingness to grant you the restricted stock unit award referred to above is based in significant part on your commitment to fulfill the obligations specified in the Agreement. You should know that the Agreement will significantly restrict your future flexibility in many ways. For example, you will be unable to seek or accept certain employment opportunities for a period of 18 months after you leave the Company. Please review the Agreement carefully and, if appropriate, have your attorney review it as well.
RESTRICTIVE COVENANT NOTICE
¡ What are non-competes?¡ Why do employers use them?¡ How prevalent are they?¡ Are they legally enforceable?¡ Key issues to consider?¡ Impact on your future job mobility?¡ When to retain a lawyer?
NON-COMPETE QUESTIONS
PREVALENCE
ENFORCEABILITY BY STATE
¡ Although non-competes are seen as a disfavored restraint of trade, NY courts generally will enforce non-competes if the restrictions are deemed to be reasonable:§ Reasonable in duration and geographic scope§ No greater than required to protect employer’s legitimate protectable
interest (e.g., trade secrets, confidential information, goodwill, or employee’s unique, special, or extraordinary services)
§ Not impose undue hardship on employee§ Not cause injury to public
¡ Case-by -case determination
¡ Recent developments regarding low-wage workers
NEW YORK LAW
¡ New law effective today
¡ Employers can’t enforce non-competes against undergraduate or graduate students participating in internships or short-term employment , employees 18 or younger, non-exempt employees, or employees terminated without cause or laid off.
¡ Additional requirements: § Signed writing that states employee may consult with attorney§ Max of one year (or two years if employee breached fiduciary duty or
took employer’s property)§ Reasonable in scope of geography and activities § Certain timing and consideration requirements§ Payment of garden leave pay or other mutually-agreed upon
consideration
MASSACHUSETTS LAW
¡ Non-competes are generally unlawful under California statute, except in sale of business context (or termination of an ownership interest in an LLC/partnership or of the entity itself)
¡ Trade Secrets Litigation
I m a g e c r e d i t : r e c o d e . n e t
CALIFORNIA LAW
§In addition to state-based prohibitions (e.g., CA, OK, and ND), prohibitions often apply in certain industries, such as:§ Lawyers§ Medical professionals in some states§ Tech employees in Hawaii § Low-income workers in Illinois§ Customer-preferred registered representative
at FINRA-regulated firms
INDUSTRY PROHIBITIONS
¡ Impact on future mobility¡ Leverage (or lack thereof)¡ Duration¡ Scope (location and type of business)¡ Circumstances when non-compete applies ¡ Severance ¡ Consideration ¡ Whether to retain a lawyer¡ Other restrictive covenants
KEY ISSUES TO CONSIDER
RESOURCES
¡ Startup LAWnchpad Podcast: available on Apple Podcasts and at startupLAWnchpad.org
¡ 50 state non-compete chart: https://www.faircompetitionlaw.com/wp-content/uploads/2018/08/Noncompetes-50-State-Survey-Chart-20180805.pdf
¡ UpCounsel (access to lawyers on-demand): https://www.upcounsel.com/employment-legal-services
¡ Obama Administration Materials: https://obamawhitehouse.archives.gov/the-press-office/2016/10/25/fact-sheet-obama-administration-announces-new-steps-spur-competition
RESOURCES
CONCLUSION/Q&A